#AOCI – Federal Financial Analytics

17 04, 2024

DAILY041724

Eliza Allen2024-04-17T17:36:07-04:00April 17th, 2024|2- Daily Briefing|

Global Regulators Tackle NBFI Margining, Collateral Transformation

As it has long promised, the FSB today issued a consultation on standards designed to buttress derivatives, commodity, and securities-financing markets under stress through more stringent margining and collateral requirements.

Basel Head Says Go Slow re AI Risk, Supervisory Models

Basel’s Secretary General, Pablo Hernández de Cos, today focused on AI’s risk-reward profile in the banking sector, concluding that it raises a series of profound questions global regulators must work cooperatively to address.

Lummis, Gillibrand Begin Senate Stablecoin Debate

As long anticipated, Sens. Lummis (R-WY) and Gillibrand (D-NY) today introduced a significantly revised version of their 2022 Bill (see FSM Report CRYPTO28) laying out U.S. stablecoin standards.

FIO Subpoena Power Faces Rollback

At HFSC’s mark-up today, the committee began with Rep. Fitzgerald’s (R-WI) Insurance Data Protection Act, H.R. 5335, which would repeal the Federal Insurance Office’s authority to subpoena insurance companies for data collection.

HFSC Likely to Pass RegTech Bill

At HFSC’s extended mark-up today, the committee turned to H.R. 7437, a bipartisan bill that would require federal banking regulators to regularly review and report to Congress on their use of technology to ensure they’re equipped to address threats to the financial system.

HFSC Set to Pass AOCI Recognition, Systemic-Risk Designation Study Measures

Continuing our coverage of today’s mark-up, HFSC was generally supportive of the two bills on the agenda from Democrats, H.R. 4206 from Rep. Sherman (D-CA) requiring large banks with available for sale securities to mark to market …

29 11, 2023

DAILY112923

Eliza Allen2023-11-29T16:51:26-05:00November 29th, 2023|2- Daily Briefing|

FDIC’s OIG Presses for Non-Capital PCA Triggers, Additional Supervisory Reform

The FDIC’s OIG report on First Republic’s failure is at least as scathing as its SBNY post-mortem.

Treasury Launches Anti-Crypto Enforcement Campaign

In remarks today from Deputy Secretary Wally Adeyemo, Treasury officially launched its anti-crypto sanctions and AML campaign.

Basel Proposes Sweeping Climate-Risk Disclosure Standards

Following the FSB’s finding that most banks were failing to provide meaningful climate disclosures, the Basel Committee today issued proposed climate-risk disclosure standards.

3Q Report Highlights AOCI Risk

The FDIC’s 3Q banking-condition report includes a stunning 22.5 percent rise in the total of HTM and AFS unrealized losses, which now stand at $683.9 billion.

Senate Banking Opens Private-Credit Inquiry

Senate Banking Chair Brown (D-OH) and Sen. Reed (D-RI) today asked FRB Vice Chair Barr, Acting Comptroller Hsu, and FDIC Chair Gruenberg to look into the risks private credit poses to the banking system.

Daily112923.pdf…

16 11, 2023

DAILY111623

Eliza Allen2023-11-16T16:40:39-05:00November 16th, 2023|2- Daily Briefing|

Global Supervisors Press Direct, Indirect CSP Oversight

Global financial supervisors today highlighted cloud-service provider systemic risk, pointing to an issue also of longstanding FSOC concern.

Barr Takes Surprising AOCI Turn

In remarks today focused on Treasury-market risk, FRB Vice Chair Barr also surprisingly said that “most banks” do not need to report unrealized securities gains and losses in capital although supervisors are stepping up surveillance in this area.

McHenry Escalates FDIC Revelations to Official Probe

Following bipartisan outrage regarding the FDIC’s harassment scandal at Senate Banking and HFSC hearings this week, HFSC Chairman McHenry (R-NC) today announced that his Committee will investigate the FDIC as well as Chairman Gruenberg for alleged misconduct.

Global Regulators Set Crypto Custody Standards

IOSCO today issued final standards for cryptoassets in securities markets, codifying its prior stand that protections such as those against conflicts of interest and embedded vertical-integration risks should be managed for cryptoassets in the same manner regulators and supervisors address them in fiat-asset transactions.

Daily111623.pdf…

21 09, 2023

DAILY092123

Eliza Allen2023-09-21T16:52:36-04:00September 21st, 2023|2- Daily Briefing|

Hill Stands by Opposition to Pending Rules, Presses for Holistic Liquidity Approach

Reflecting his votes on all of the recent proposals, FDIC Vice Chairman Hill today criticized recent rulemakings as an overreaction to March bank failures and urged regulators to carefully consider the proposals’ aggregate effects amid uncertain economic conditions. Although he reiterated his general support for the LTD proposal (see FSM Report TLAC9), Mr. Hill argued that the FDIC should focus more on regional bank resolvability via a weekend sale. He also pushed for a more holistic approach to liquidity requirements, arguing that they should be more durable for a wider range of stress events and better reflect bank behavior in times of stress.

Daily092123.pdf…

14 09, 2023

CAPITAL235

Eliza Allen2023-09-14T14:23:57-04:00September 14th, 2023|5- Client Report|

GOP Blasts Basel End-Game Regs, Dems Seek a Few Changes

With HFSC Chairman McHenry (R-NC) leading the way, GOP Members of the panel’s Financial Institutions Subcommittee today blasted the banking agencies’ end-game proposal (see Client Report CAPITAL234). Republicans were unanimous in joining leadership’s attack on the proposal’s process and substance, pointing to what they called incomplete impact analyses, an inexplicably short comment period, and adverse macroeconomic and regional-bank implications. Democrats led by Ranking Member Waters (D-CA) were more restrained and in some cases supported the proposal, but concerns were also noted with specific provisions (e.g., re the treatment of certain mortgage and securitization assets) and the interface with the pending CRA final rule. We continue to expect the banking agencies to hold firm to the proposal in broad terms and make minimal, if any, changes to the comment deadline. However, pressure from Republicans and the industry could well force renewed and what many would consider improved impact analyses designed not only to allay political opposition, but also the courts if litigation challenges the final rule.

CAPITAL235.pdf…

17 08, 2023

CAPITAL234

Eliza Allen2023-08-17T15:22:40-04:00August 17th, 2023|5- Client Report|

FedFin Assessment: What the Agencies Think the Rules Will do and Why Much of That is Wrong

With this report, we conclude our assessment of the regulatory-capital proposal with analysis of what the sum total of the credit (see FSM Report CAPITAL231), operational (see FSM Report OPSRISK22), and market (see FSM Report CAPITAL233) rules could do in the real world of banks, nonbanks, foreign banks, and complex market interconnections. Our first assessment of the proposal’s framework (see FSM Report CAPITAL230) provided the agencies’ quantitative-impact statement (QIS). Here, we evaluate the QIS, expand on the agencies’ qualitative conclusions, and add our own assessment of what might actually happen in the face of these sometimes-contradictory capital incentives.

CAPITAL234.pdf…

4 08, 2023

FedFin on: Credit-Risk Capital Rewrite

Arezou Rafikian2023-08-04T13:41:04-04:00August 4th, 2023|The Vault|

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus ….

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

4 08, 2023

CAPITAL231

Eliza Allen2023-08-04T13:40:43-04:00August 4th, 2023|1- Financial Services Management|

Credit-Risk Capital Rewrite

In this report, we proceed from our assessment of the proposed regulatory capital framework to an analysis of the rules governing credit risk. In addition to eliminating the advanced approach, the proposal imposes higher standards for some assets than under the old standardized approach (SA) via new “expanded” requirements. As detailed here, many expanded risk weightings are higher than current requirements either due to specific risk-weighted assessments (RWAs) or definitions and additional restrictions. This contributes to the added capital costs identified by the banking agencies in their impact assessment, suggesting that lower risk weightings in the expanded approach reflected the reduced risks described in the proposal for other assets and will ultimately have little bearing on regulatory-capital requirements and thus on the overall ability of banks to expand into lower-risk areas and compete more effectively with nonbanks and foreign banks. Big banks forced to abandon certain activities may expand others receiving capital discounts in the new rules, increasing their footprint in traditional banking in ways that may increase industry consolidation.

CAPITAL231.pdf…

26 07, 2023

CAPITAL229

Eliza Allen2023-07-26T14:30:18-04:00July 26th, 2023|5- Client Report|

FedFin Assessment: What to Watch in the Regulatory-Capital Rewrite

As promised, we plan in-depth coverage of the Fed and FDIC meetings tomorrow as well as of the capital rewrites they are set to propose no matter all the warning shots from Congressional Republicans. In this report, we provide an overview of each of the rules the agencies will propose based on key issues in the Basel end-game standards they will finally advance. We do not focus on details or how the U.S. may adapt these rules except where public releases have provided advance insight. Instead, we highlight key issues to provide vital background and context of tomorrow’s actions as well as key decision points on which comment and political advocacy are sure to center.

CAPITAL229.pdf…

30 06, 2023

GSE-063023

Eliza Allen2023-06-30T11:00:43-04:00June 30th, 2023|4- GSE Activity Report|

The Ides of IRR

In non-public remarks ahead of a presentation by FedFin managing partner Karen Petrou, Sen. Jack Reed (D-RI) laid out what he thinks banking agencies will do next, doubtless based on what they’ve told him that they’ll do next. We have predicted that new interest-rate risk (IRR) standards are high odds, but Reed’s comments suggest they are a near-term for-sure.

GSE-063023.pdf…